WHR - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to Whirlpool Corporation's Third Quarter 2018 Earnings Release call. Today's call is being recorded.

For opening remarks and introductions, I would like to turn the call over to Senior Director of Investor Relations, Max Tunnicliff.

Max Tunnicliff

Thank you, and welcome to our third quarter 2018 conference call.

Joining me today are Marc Bitzer, our Chief Executive Officer, and Jim Peters, our Chief Financial Officer.

with website available at track section the today our of whirlpool.com. remarks the on presentation investor Our

Before we statements begin, conduct in this I'll Whirlpool remind you we understanding be that will make future forward-looking Corporation's to you call assist expectations. as we

could to results these from of today's measures. that ongoing includes remind discussed you materially many other periodic We statements XX-K non-GAAP measures indicators our that unrelated our latest indicative differ they and to are to believe reports. factors exclude actual our not Our may from due in of as We important these business are want or operations results operations. presentation items be

ongoing think provide of listen-only directed measures GAAP will are of measures. At the package baseline to are most you the also time, to supplemental for participants for comparable on website adjusted non-GAAP section operations. in in Relations business items the mode. Investor the all information Listeners better We reconciliation our the posted our a analyzing this trends directly

remarks, our opened questions. analyst will call Following for be the prepared

reminder, let a call turn ask As to more ask over me Marc. the With questions. that than two no we that, participants

Marc Robert Bitzer

show everyone. our and X Thanks, highlights. good On slide third morning, we quarter

four our of you regions. as per share well delivered As of in press three record saw $X.XX, expansion margin as we release, ongoing in earnings ongoing EBIT

in all earlier price/mix we quarter row the this strong as a and we regions, in second mix to very year. For took benefits realize delivered continue we actions of the price

external to line share further also we growth. today, as on in on continued margins industry ongoing delivered we the are the impressive XXXX, call. despite weigh Jim in demand and pressures results, later and our challenges announcing delivering price/mix. strong quarter. results, the in increase Europe soft region our restoring and regions EBIT And third European and driving by we Additionally, made expanded Operational strong improve volume while our North refocus slowly bottom to performance U.S. sequential encouraged top very actions positions We cost North we American which our but discuss are progress in will continue America

part as announced factors, raw to increases, cost and including base currency including have tariff material to initiatives we external our respond headwinds, Additionally, home new and major kitchen our ongoing business. appliance of recently price Brazilian U.S.

for multiple actions in taken have prepayment a U.S. impacted to favorably voluntary notable pension obligation. most of we changes long-term a which of Finally, rate tax our recent the related our effective legislation, quarter, tax portion

will Turning discuss to our X, results. I quarter third slide

related of investments approximately Ongoing Excluding America marketplace currency, launches. price/mix. recent continued strong America delivered we as X.X% inflation and global EBIT price/mix was more Latin North was growth volume than global unit by offset growth margin and increased product cost X.X%, by and driven in to

earlier, contribution mentioned funding, a free long-term $XXX voluntary our our we As cash pension obligation of which year-to-date. made approximately flow lower million to impacted

We will later more on call. in detail our the discuss guidance

that we across strong regions confidence well to expansion upcoming the discipline to and are execute ability and cost-based quarters. improve improved increases Our multiple furthers flow price margin while conversion free drive positioned deliver maintaining cost cash mix over our successfully

quarter show X, third slide we drivers margin of performance. to Turning the

year-over-year earlier, sequentially and price/mix mentioned well all improved as four As global as positive our regions. was in

to fixed-cost in expectations. previously progress line Our actions with continue reduction announced

by offset During three drivers. main the quarter these benefits were

volume rising to well with costs primarily freight we action. as inventory deleverage, our as experienced cost, First, net the related reduction

approximately quarter material margin year-over-year headwind, raw points, by impacting currency to by margins a basis third continued inflation be points. impacted while basis XXX unfavorable significant XX Second,

in Jim the primarily presentation. in related detail investments America, North margin was discuss will our to in Finally, additional more launches, which impacted later by product

either improved price/mix price/mix positive significant again slide we the Turning third we basis in and by price/mix price/mix, compared every approximately quarters. points demonstrated sequential success a performance. These year, delivered or XXX our of over maintained On commitment delivering past X, we've globally. improved every demonstrate implemented to driving In all the the quarter-over-quarter once XX basis, prior quarter to to initiatives results several regions. the region total, basis improvement points year of

recently results. during increases over that, we announced Finally, become Brazil turn U.S. it like our quarter. price will multiple additional regions, With to our to which cost-based review including I'd in fourth and to businesses, regional effective kitchen Jim the

James Peters

Thanks, everyone. Marc. And good morning,

decline both margin more we freight America primarily kitchen We ongoing third EBIT the quarter strong to ongoing X, impressive spite than points our external raw demonstrate the price/mix These challenging this strong and results as for delivered XX%, basis despite sales review X% the once expanded the cost basis our margin region. revenue tariff with North to strength well in our show X% increased results due slide market initiatives to success Overall, inflation. share a of of environment. expansion, in we and gains, quarter. business the overcame America. as of North again price/mix growth our and in in volume Turning proactive growth growth the XXX category. our of points as performance through fundamental material, demand of Net in nearly delivered and strong quarter very cost an XX industry results We

previously pressures continued deliver our kitchen continued expect cost next as in we increases and U.S. to offset forward, price expected strong region are to price/mix actions announced announced results cost-based the year. Looking recently

North shown connected products, investments offering laundry two kitchen innovations. the In including a products a under expect launch growth products expansion number of to brand. including mix $XXX line, of voice we capabilities. business, In products of we platform fourth modern are design these These laundry compelling we and Whirlpool feature those we connected we have as launching all-in-one our frontload margin dryer. the addition industry-leading quarter, brand-new completed and In our and the nine. the approximately features, third and made a America improve including These slide Yummly-Guided and command volume actions, deliver Also, massive to innovative totaling on combine within continued million. through Cooking quarter steady washer

laundry top load both major new will mass in upgrades pair in dryer The XXXX. and platform investment second offer and consumer launches later specific brand connected relevant mass premium brings to innovation washer and This the significant and our segments.

enable we and about continue these our are margin and our While expansion new excited across to growth on opportunities products cost managing containment truly and business. price/mix focus portfolio, that we will for other the

third Europe, Middle XX, our slide to we review results Turning quarter the region. and Africa for East

and sequential beginning productivity currency, price/mix versus X%. countries. reducing down unit net with were than the remains but to a in most unfavorable declined progress prior improvement year more was of inventories. see Excluding to as volume Volume challenge, the EBIT sales by due we impact are offset declines positive

points. of more Additionally, $XX materials, basis than approximately XXX unfavorable million by combination the currency inflation, and raw results or challenges impacted operational Turkey in

Turning to and slide I you to to to on profitability. we XX, the actions update EMEA would the business strategic taking return like refocus are

our volume slow. order the to floor change lost recovering the year-over-year, been have fourth actions trade spots further during with drive saw In customers to rebuilding the the the our restore taken specific the expect we quarter relationships integration. across have in improvement we're recover We volume in core quarter, and fundamental peak and focused First, on but third and magnitude pace a in and some of EMEA improvement business.

towards capitalize marketplace to segments not profitable We higher we also to volumes, refocusing are ensure our only margins. also most new product that committed investments innovation our drive to but on expand

our EMEA aspects of announced we begun to have we business. last quarter, certain reevaluate as Second,

As part of that several effort, announcing our new business. we to actions strategic right-size are and refocus

a exiting of as business. our be our which number businesses, include does will branded as small Hotpoint We factory operations, not domestic sales including operation Turkish lossmaking appliance the well

and operations of $XXX refocus our a for full million on Africa Additionally sale core South for evaluating of represent our business. we in businesses potential Together, sizable million EBIT loss XXXX. the we approximately these a $XX year are European three as revenue

fixed we announced region, This deliver Finally, is reduction is initiative announced expected in year. a $XXX which million global million reduction to benefits cost fixed have to addition the $XX last for an XXXX. the initiative new cost

restoring structure back result throughout represents the and actions cost these we to cost With regional region. of drive we XX the to in on expect improvement for first This annualized targets for margin and region. to results step $XXX getting that, third improvement slide EBIT actions, profitability a Latin a long-term completed quarter our track is America the step toward function As turn as to in million our exit review before our to all are XXXX. of approximately EMEA

unit driving X%. Excluding positive offset net $XX price/mix margin currency, We material more price/mix. the and sales strong EBIT results these volume volume through currency growth, of raw million XX% Ongoing gains impact delivered increased headwinds than growth strong share of approximately and expansion. and as increased

in the benefits the quarter through positioned XX. coming are increases Latin slide realizing shown expansion in turn America of announced results now cost-based We strong to on We region, price the are region. our recently to for well deliver the which third and Asia cost in margin discipline quarters

Excluding declined delivered $XX the impact of year. EBIT a the improvement We solid of currency, sales net X%. million, versus prior

strong China results and We headwinds industry and quarter related and improvement $XX approximately levels EBIT raw delivered material third were to impacted price/mix. temporary demand results Our million of lower by positive inflation volume in positively productivity despite weakness.

back review over like guidance. to Now to it turn I'd to Marc our

Marc Robert Bitzer

we will updated our XX, slide On Jim. review guidance assumptions. Thanks,

Europe continued revenue to be flat margin of $XXX half. global million, revising we price/mix deliver items, the than as as cash as success in improvement Despite voluntary in by free $XXX we our cost North reduction prior weaker free of total anticipated expect We by to of strong flow as of second initiatives America, result the the voluntary this expectations lower onetime We our to to cash driven continue pension approximately for our expect our the ongoing is and volumes. unit to contribution. business now are deliver underlying year, Absent year. flow offset our expect slightly in well EBIT primarily of results strength approximately million price/mix a

ongoing pension our pre-funding XXXX XX.X% of effective planning driven rate tax and an year, expect we full approximately actions. Finally, tax by additional for voluntary

deliver all-time these to which adjustments, of high-end result we $XX.XX share ongoing per $XX.XX an expect a guidance of share, to narrowing towards previous the per are earnings ongoing be our earnings our record. We will range. now As of

of EBIT our updated we Turning ongoing show XX, guidance. drivers margin to the slide

expectations. deliver benefits expect continue $XXX price/mix in of or with strong have net X cost-based line delivered from results price million We increases as our improved global to to points approximately

Our remain previously announced fixed benefit million track on reduction year. $XXX this cost actions to deliver

expectation for net reduced freight has inflation conversion volume However, cost. price impact has to cost as continued have fuel our we impacted and our weakness

and to margin we Overall, this ongoing Finally, unchanged. our are investments expect guidance for EBIT now raw X.X% material marketing year. inflation, currency deliver

priorities. Jim regional cover cash Now, will our and guidance

James Peters

regional our guidance. September We year. continue and industry and full show ongoing negative approximately to we expect XX X% X% in to year. we slide X%. growth saw XX% approximately the to In growth of margin industry deliver approximately EBIT on On the Marc. full deliver margin U.S. Thanks, build to modest now deliver in the continue expect margin for to expect EBIT the And North of for we now to America EMEA, EBIT we

America Asia for guidance Latin our Finally, unchanged. is and

XXXX Turning for essentially guidance to slide XX, previous guidance. our same our total the as free flow cash remains

due reduced cash in our a slightly certain expenditures of performance reduced EMEA. result changes of guidance timing in to have the projects. have We our as earnings for been Capital

impact cash flow is approximately voluntary our items, year full XXXX free million. Excluding $XXX discrete expectation the of

discussed $XXX approximately real earlier, million fourth of Our of optimization pension in reflects updated as opportunity the we expected well portfolio benefits pre-funding a as quarter. free estate guidance the cash

Turning track. and on are for show which we our XXXX, priorities allocation XX, to slide unchanged capital

Embraco and In XXXX. expect we record an returned compressor cash approximately in continue the business to approximately we in $X.X all-time in quarter, an million we We quarter. of expect continue repurchased billion the early Year-to-date, repurchasing close which common fourth stock $XXX on to to shareholders, our the to annual represents of third already shares have sale basis.

it Now I'll back over Marc. to turn

Marc Robert Bitzer

Thanks, Jim.

to like few provide I moment for assumptions regarding expectations XX, would a our slide to take to a turning XXXX. current Now

housing the in on view U.S. positive U.S. low market. growth in X%. expect on digits, A industry with regarding perspective modest the of part our approximately We industry is single growth industry U.S. global showing the based appliance the

housing we related favorable less trends housing recognize attention. and sluggish that more to getting existing demand the and there some sales, starts in While fundamentals are are supply home

the housing XX new starts is housing the back the now apartment rental of been absorbed. the units of well by XXX% below average held has current of Further, massive the First, constraints. has end X.X per Since and years recession, remained supply million supplies year. XX stock year age recovery the fully recession been of have the U.S. the since

a thirdly, coupled where And would we constraints In scenario are a well in demand led expect home demand. a constraints ahead the rates rental be and paced apartments. This, them of has a of and interest in inventory rising slowdown supply prices. and prices for with where tempered strong have to home favorable essence, mortgage including increase the appreciation fundamentals, demographics, Secondly, to you cycle. of low homes slight will a rate now home a seeing homeownership price meet year need appreciation XX strong strong at and

continued would combination in these a help continued ensure well recovery We of to slower expect in markets the turn to perhaps for the healthy housing appliances. new at which factors lead pace, demand

increases clear material of be will and these fully that we focus expect positioned $XXX inflation approximately as continued our to previous cost-based raw recently on in tariff faced performance to North U.S. we We year. by inflation we Shifting this discipline price the offset to announced the industry for us to deliver American XXXX, evidenced and currently well a year. want is any the million, margins will strong and cost environment, believe business continue expect cost this expand our also years grow to our takeout in coming costs to in we of factors, cost do to in result coming While by results enable XXXX. similar what as

point, rate I ongoing to remind less in January. want for expenses will anticipate provide on XX%. also XXXX that this you significantly earnings effective restructuring quarter we in than to we At and Finally, our our guidance of fourth XXXX reduce tax an call

Now, formal questions. we and will remarks end it for our open up

Operator

Ken of from question a Capital. Zener take KeyBanc We'll

Kenneth R. Zener

morning. Good

Marc Robert Bitzer

Ken. Good morning,

James Peters

Good morning.

Kenneth R. Zener

So a volatility. year, of price quite it's lots as U.S. amid steady gaining international been very results you're

big important of your this adjustment, was loss. a it's away and would I $XXX million business what say, year, walking doing is from which just million you're So $XX a because appliance, you're such Europe think in small I so revenue,

Just for XXXX? XXXX to if profitability and which to the to money those say still sooner able making below trying how your, given your you X% margin margin basis. can And perspective, I'm shrink were long-term believe, FY to are FY XXXX just I might was that because businesses, business, let's in, I ask I'm targets, to be you understand on your X%. understand way targets trying of there get FY

Marc Robert Bitzer

Yeah.

Marc. Ken, So, it's

in let actually two pieces. maybe me So answer the split

pricing had First, overcame result our overall I started result which very, the think U.S., XX% headwinds because growth, is obviously, you delivered we margin, we very of are share a the given pleased with U.S. traction, we in very growth, revenue a strong lot QX. had environment. found and We

our So U.S. performance. with we're pleased really

South option production, on noncore Africa. bucket looking Turkey the Specifically we announced the not basically actions a Hotpoint business, European, fall call the sales, for for are which it's into at and SDA we business, domestic of it's sales we it's the domestic

in a year. million around $XX saw revenue, this the you As $XXX presentation million loss roughly that's

if to longer for not which year term of I full or are businesses all. your no value did even would look back at question, over Now value XXXX, us at a create specifically these lot

Turkey, into. Turkey a a and strong tough stores because get you health in Specifically difficult is always franchise local is even environment network to which strong competitors in business have there's

want a it's tough market, didn't a where this say perspective headline value. environment, I stop was long-term also normal bleeders in see So we create to would a to basically under the even we certain and

focus the no, what want a way want we bleeders. with eliminate Now on to doing chance businesses. shrinking your to also We give your about actions we some core the to these to team to linked point are profitability, is

money money make markets where are lot can we we are core our a and We making in of strong.

is So focus. short very in ultimate what back this profitability to call. in is The referred comes beyond to much which about way conference the previous volumes, the to I term, restoring the ultimately more

the is of profitability path business, the built-in so-called actions our strengthen to have restoring short-term volumes. business. We That's our which beyond kitchen to

Kenneth R. Zener

you. one, or can one, ask Thank another that two I Was Marc?

Marc Robert Bitzer

Sure.

Kenneth R. Zener

had X% is receive at out year, we there. looking you after running, introduction, the elasticity you're share, or when think in kind got and there the has Is price. price looking gaining you Okay. Do about volume industry you're which X% and/or in LG, Koreans, you questions volume Korean your which abated just is got you having volumes volumes I of you XXXX, of say there's Well price, Mexico period is and from the X% price related XQ price, lots price, where saw because with that thought items, market at we the U.S. guys you. fallen in certain Canada two had volume weak, Thank that now about realizing was the of actually to and price run increase where Samsung the in the elasticity very a the dynamics pre-tariff about to elasticity Could perhaps those of talk tariffs? clients product. and outpace

Marc Robert Bitzer

Marc it's Ken, So, again.

the to of a always question on reasons. first careful for a all, of elasticity of elasticity, number little number I'm on bit So a precise give

elasticity seeing First in has strongest environment, – full there, say standard. and given between our course, by been a and on have certain other year this Having is a it's year particularly not of I full amount historical what of elasticity. demand U.S. trade, on out do highly difference side, if price/mix you prices said base, a we're sell there any overall way. would on i.e., at argue of there a would year execution sell-in, is sometimes a competition in always current would you But competitive consumer probably all elements. drives limited look the sell-through any base so quarter, argue strong through i.e., you consumer category the price which point I necessarily impact that, consumer what in I at

has pleased I very referring you're our first to the want laundry are we about to it. So how price the team kitchen. was And us in also increase traction, implemented remind

was mix we laundry, manage that that, just understand the we've increase categories marketplace. our it's actions this with not how proven price additional and kitchen really, a I highly certain think and pleased competitive on throughout So And entire are really business, we a cost-based we the in also side.

Operator

Our next of question is from Rehaut Michael JPMorgan.

Michael Jason Rehaut

Thanks, everyone. good morning,

makes or a it expecting I'm moment to will loss-making I if what full lose for a if little exiting lines. But product a this be could regions looking Europe question, at it First some think year, obviously, sense, go lot the and of for $XXX to back million. above you're bit year

easy question the is, as areas, XXXX? look loss, black or could sometimes back. stabilize specifically in my you of other about And much trying lose thinking are that perhaps to there towards you obviously flooring recovery, towards I'm gain it's line being you it's share, and top harder recover to the to think XXXX, So or get and volume it some for

just need fruits the black do about So recover thoughts that the to of thinking you your into some and yourself push items the the to some of around timing how you're to and around volume? upcoming labors additional back want trying what of

Marc Robert Bitzer

these were we mean, only Michael, actions first answer, they necessary, of point are as announced of out. you were all, part I the but critical, on which

to infrastructure presentation. as where we slow. to frankly has stabilize that's first that's I the so a fixed First in seen But half, we slow, improvement, sustained given able to reduction been cost certain you all, on slightly improvement, regain you you mind been loss-making carry. XX% in even a intensity the XX% mean to difficult very QX customers we simply always exiting our minus beyond announced QX the in has because right, given volume, fixed improve have starts the it's deleverage do the I obviously presentation, lower we yes, In improvement how cost and of keep certain from structurally a XX%, we it re-motivate you of very midyear trade massive saw that's said. better minus you annual minus lost the cost volume, which base, XX%, In business it's floor a the an cost to have saw what impact spots, agreements. have business, also benefit. to which And to we've but as mean

profitable We much minus to we improvement. want comes and volume flat expect perspective Europe. with to exit the further that ultimately roughly trend pretty to the a is starting from in a so business it's But X%, year a point it a back have

James Peters

on within we've look this that significant taken Michael, inventory that that And, to – of the of EMEA. of some a say inventory is – actions would levels reduce does at our I you Jim that if top come year-over-year, portion

that So we volume EMEA. there – had to additional deleveraging just within share top due volume is was loss of on the the

Michael Jason Rehaut

the Great, second the your thank from XXX have towards margin you. cost bps. to the question where year XX walk, shift net I you reduced full for XXXX to guess benefit bps

mark, far I think XX quarter bps, of if first been so like it's able right do looking XX that line year quarters at you on been to what bps couple you in last that hit you've I'm item. if look this more the the

over of fourth a over a number it would bps math XXX So benefit. much dictates well well the quarter, just bps, – obviously I XXX believe for imply the stronger

to terms just that from or you expect higher a to higher XQ speak? in either growth So better of number weighting that revenue actions XQ what's or driving kick payoff, are volume number that so What's or certain productivity driving in number?

Marc Robert Bitzer

Marc. it's Michael,

of the and all, freight in including been massive, of what is particularly as first the inflation, a we as net point in which of U.S., for know costs you clarification, the most So but just parts have world. also has

cost. these literally sitting inflation inflation, labor tariff are freight the in all we on negative elements you a see and tariffs. what material of only net the what is see see material which is Anything kind we raw in So raw costs,

Jim want very a in I as Just made a made for and QX. significant point between of inventory before. back a reduction clarification. to to Specific company to QX, which We come point your QX question

dollar end of are you we you so certain a leverage, of inventories on heavily cost down. weighs recall, our million in captures or of deleveraging, pretty inventory flat may benefit, Embraco QX. we volume the QX, because if we out we net every $XXX much you QX takeout, include so know, year-over-year, inventory and all QX because had end are cost As much But took cost that sits as

So in in expected a certain not explains QX of we a that way, are the be would which out burden will of that QX back say I run rate and part to kind why in QX. have and coming you QX would

Operator

Our Darkatsh question Sam from is of Raymond next James.

Sam J. Darkatsh

Jim. Good you? good morning, morning, Marc, are How

Marc Robert Bitzer

Good morning, Sam.

James Peters

Good morning Sam.

Sam J. Darkatsh

to with if optically shipments. least That math first the quarter the in the questions, to some appear looks for that up Two Sears especially you it like are would respect digit. for be AHAM to fourth essentially the suggest mid-single could industry implied guiding guide bled gets inventory U.S. aggressive, down. At channel

sell-through your seen Now we but versus in what should about retail how quarter pre-buy ahead the price would retail quarter we've fourth why year? increases, how thinking of favorably and about I'm some improve sell-through in the guessing you're think at in think baking this at earlier you're I fourth

Marc Robert Bitzer

year Keep August. better. finally started first so in minus is I sell-in Sam, was correct. plus X% full overall between September in we September said still running kind and sell-through your impacted earnings plus July we on come through strongly to soft by also closer X%. the was of sell-through and base. getting all, we we've see that already to And saw of QX the we Actually mean, X% call what in observation previous or a mind X.X%. a seen sometimes a

which to your X%. overestimate the would QX, because assume. Sears basically to less year is a first similar it's question, all, our lot sell-in the So is you I full expectation think on I plus inventory around that is than might not this very sell-through Particularly of of impact, the

trends solid. heading Second September the do in price on actually the shipments of I sell-through the announced November/December point in to even yes, right now And is expect particularly the we and – related also fairly promotional early we kind is, we as think increases. October cost-based industry our periods, are sell-through see already that's into some

Sam J. Darkatsh

for cash of don't Next question, XXXX it free with the cash restructuring, a but how might range is with parts you all XXXX, think how free sales for free have X% noise realistic that to year can target knowing want cash flow. peg items, you have with – a flow in discretionary we you flow flow to many was free that to that on see moving stuff, in I in X% cash of specific X% XXXX with of cash? long-term lot there X% tax, free to this

James Peters

obviously Yes, next Sam, a years a pension this one, of would've pension equivalent assumption here I what contribution contributions. is five it's Jim. And been that a this our forward. the Because item, as look safe happen you And is things will think was that's of of couple onetime $XXX million.

comes and have the we piece out future So that accelerated years. that of

restructuring on cash, we the Additionally peak payout the the cash. of are of the restructuring at

forward, the capital working over still level, And believe have forward opportunities capital, future are should years. our opportunity then that capital look down so this we from working is same there not a benefit significant while And come we we as working will year we that go but into as XXXX.

Sam J. Darkatsh

X% next to is So year? X% realistic for

James Peters

is, It yes.

Sam J. Darkatsh

Thank Okay. you.

Operator

is MacGregor Research. David of Our question next Longbow from

David S. MacGregor

morning. good Yes,

Marc Robert Bitzer

Good morning, David.

David S. MacGregor

business, inventory levels that be impact Sears order not and down? Can of kind of can could maybe about retailers to as a exit, that. are think kind guys people. this consequence to extent I looking Kenmore so liquidation the maybe around can you a this. I color you're talk just other of of you helpful to on lot just talk I year's this parts, lot you extent I trying sense talk know moving of yet, guess boy, what their really seeing lot going inventory that right potential any would lot about should about quarter, with we to this talked by have maybe of haven't people the on. Just now you a get a to guess make about cancelation but the got to you provide

Marc Robert Bitzer

and So to about I lot a David, Marc. been need has Kenmore, don't whole Obviously written Sears it's a it. lot and add to

the First in our already of announcement business all, we our impact week, very on limited. last as is

looked You of saw announcement, had the historical a of roughly low we you could at in around day we our, if $XX very the exposure kind standards. had – receivable million, have which of, is end at

So that very manner. in we proactive down managed a

will is You than of we there half accrued in uncertainty see details about or also for and more it around our half, it.

own lot we always should position assume questions historically inventory Sears, was I process, accordingly be engaged effective Sears XX moving expect a inventory very in be as right lot and a expect that. Now while moving very it process, market first again, chain. I the the in manage not dialogue we protect we will – also high. well the would we the support on will pieces, right inventory constructive from Sears Sears and activity of you time and but it store And there's interest, obviously, of have QX Sears that very Particularly in going liquidation, in pieces a we're all, footprint QX, will in I and very now. some our that we're of us. same about part the would QX with means of there's the you see for would the of right the what now and But a had forward. and with a active and it think the Chapter all happening certain we're is at efficient appropriately Sears supply in

inventory big last So Sears further historically that inventory over the have even been and down would came not year. holder,

Sears don't model is because very any it's the in limited. remind, which overestimate inventory out have, there would you I So

David S. MacGregor

work us is month guess for a a is in bigger any with manufacturers, whatever assessment, kind shipments? of little But bit of so way had can And just sort it also the you or Sears some in is there process look a give an when worth than of months' of RDCs. inventory couple I responsible it's they their the like

Marc Robert Bitzer

a largely producer, not for overseas you give can I producer. us are keep we domestic David, are a in So, manufacturer, answer mind an as we

David S. MacGregor

Right.

Marc Robert Bitzer

the have short we very chain. responsive a of So supply benefit and

build-to-order. are forecast. products So you a they the Sears the once get we basically what produce and would our order call We historically,

inventory, impact over probably the So coming we chain that's build-to-order why very ships business and on of we short with across our is don't reason Pacific lot have have limited. a our supply also the big

big if Ohio no. we you think answer is where Kenmore a the lot warehouse some there So of is somewhere units, in keep

Operator

moving been My - Our sort guess what by of and parts in through Maklari pull-forward some maybe like normal next Suisse. terms (USA) and we of fourth actions lot should even of coming Good some about some that are some through could you've America think more Securities have of I terms together. wanted that of How It And come that in how the got question events to that? of margin to Credit from is as to trends in fourth of actually of could of Susan come Credit tailwinds? the think some relates pricing the have can relative of LLC taken, question seasonality margin that I'm is get its Maklari morning. negated Susan these there. I some the about the a normal that that quarter promotional is feels North first quarter of it some to the to tailwinds in volume like Suisse trying come things

James Peters

because is But North No, promotional that's seasonality also we the – our for big season that. highly year-over-year. that, kitchen within – very mentioned, it our business, see one, margin I prime America you countertop appliance that's then all and drivers that's quarter the a as would similar period say there, two, type that within the of similar a will fourth you for and

two key no are you changes. inputs that just to big is the so differences slides, million those Can and the LLC And that and raw America, Suisse Credit significant been around expected QX any us this your the what margins that drivers are some stay outlook give - we for what see Okay. you And don't is Securities of then inflation $XXX (USA) Susan you've affect there the Maklari and year. seeing context in North in those? on terms noted of material range

Marc Robert Bitzer

Susan, it's Marc.

year said, million. expect raw we all, inflation of and material $XXX we will around of inflation first So this tariff

effect largely is all that out, driven plastics pointed steel we XXX in by As forms. year this and the Section prices, including

see $XXX the which of have And the again than around were it's impact from is the these it's element tariff outlook have seen we we strategic that, peak. or At a we you certain January. remains. this our from in but still electronics. for raw There's behind guidance sustained, that carryover for real And components biggest once updated increase would element presentation. inflation. can which you've which on raw more we oil-based will certainly products. what is of That would particularly steel, the impacts XXXX. see So actually We still slightly comes the material tariff its effect some around million says one similar uncertainty and And element point, other material items down not higher stabilization raw developments, top the as a on in material give in year seen assume on or just a tariff motors uncertainty quantify, like we expect we the coming largely next do XXXX a

Operator

is Our next of of Merrill Bank question Nagle America Curtis Lynch. from

Curtis Nagle

confidence based I current, a it the assume much you you $XXX $XXX in quick year next price a guess what think don't on the more expecting see does little increases Is the be very Great. continued questions. taking guys that guess price? guess could do assumptions round before? much the Thanks walk-down my just in and (XX:XX) steel And million, have yeah, in you I and specific know, on, like of last did how that the don't I in that's another you Marc, on? follow-up year. year are we for it I cushion million we

Marc Robert Bitzer

it The a price spot first we material a is with have have contracts because spots, clarify, short-term and contract. more never typically because we again to raw you only it buy the current we or of we we hedge can't have It's long-term buy year against items, full particular can't forward outlook, element all the we raw expectation. which whenever give material you against Curtis, is again plastics, in don't big hedges. don't –

is outlook prices. current expected against rates, spot forward our So not against

Now what course, to expect spot you of some price extent influence base. on always, a go forward

based assumptions. to So is with year full in price on the what we expect on certain would now right based base and outlook on we price, this a basically spot current lock is what steel development

think remind So in or we in QX surprise horizon about plastics – top still The I to development next lot in around frankly this around three year. on our did the months the clarity also get that QX And material the sudden you uncertainty the ourselves XXXX, remains in more want tariffs plastics. then a we the big two will of one. in I and particular and which the raw on started had that have we of not on when was plastics. the

which one. the course in of uncertainty an inflation, that. now of in with But this material always we a lot associated with know so raw counting on we're there's are some around tariffs known, inflation So and what environment we're living

Curtis Nagle

least free help Jim. could mean the a generate some And Okay. pretty pretty like had flow, gap Fair but that the bridge I cash understand you where for big. guess I a Yeah, is you is cash year? deficit, historically then flow us I detail quarter just XQ in question for big looks at it enough. the a

of are just confident for are yes, you in biggest then how what pieces hitting kind that order, year? and the in $XXX million the working So target

James Peters

in this but overall QX so see first reduced less inventory this in we we that accounts of a will And Curtis, to thing CapEx lower year level last driver the said of levels That's which we they year-over-year see this coming capital. we've have out is of of last $XXX where million, significantly flow are as fourth year about have in timing we means fourth the while expect as versus some the reduce mentioned real Yes, that right slightly levels this of mentioned prepared the just be year. payable, The is biggest within year. is those QX, lower I earlier, the now QX that year pay thing different those that's was optimization below of that that from to we when are significantly the which last inventory that the we be through. would next investments partially I portfolio year. on the see. are year remarks are them we And also And it versus those expected, we earlier that we you we will driver due that, and in quarter that other biggest pension originally of than the coming working the making quarter, most QX offsetting estate And our opportunities year, were last which QX contribution. then

Operator

is of RBC Dahl question next Markets. from Our Capital Michael

Michael Dahl

cash, and Hi, on it. I for actually my taking free about My first a two follow-up thanks is wanted one things questions. to different ask

you've is further about XXXX of for touching it relates year, significant baseline more about regarding whether how given just working adjustments the be and working there kind if or should on it response as to a that just neutral? this first, last talked we think improvement The for should capital, making room cap

James Peters

it Well, be as for I significant a and us, will a said earlier, significant item year, for this opportunity.

opportunities maintain be will this would incremental look last will there it looking say this we continuing are year opportunity at year's will $XXX But working above year. million but that forward reduce smaller, As being the next at I not year, capital. but level, we see approximately reduce be be of of to to an our through inventory, we that working And the our levels as most well same opportunities and will we as continue globally, reduce comes look both but our primarily portfolio, that's to levels product our service. opportunities cap. sit as entire inventory where throughout

Michael Dahl

it. Got

having change some earnings. the is assume would really, as that second I in cash taxes funding just also this understand tax rate this pension I is the the in year, rate lower And question related better well, ties extent on but want tax Okay. benefit it that to and expectations. the And contributed your the to

I it pension of, if excluding would've kind funding. wanted been but pointing the out like understand, so seems the tax voluntary rate million higher for to $XXX And you're not of, items,

a from impact So benefit and of standpoint, overall on tax your what's then the cash tax rate? that

James Peters

Yes.

again, on our for of impact has tax about year. the that you rate overall So are an this correct X%

repeat So as future the that's and go next but to that expect are at year. we itself said would X% XX% years, year, right obviously in now forward, at not look this that below we you XX.X% be why we've

In terms of impact small year. relatively to cash it's earnings, this

just benefit million is about think $XX-some-million. the $XXX overall can on you around If

this all year past allowed our not comes this the has what's cash were very so throughout within happened flow so also, it's year, no us have that planning made free but small tax on strategies year. cash lot, change of impact – regulations for beginning a that opportunities. allowed had as is the it's identify and the at Also, we to tax longer tax again, the evolved most a our at go the to And the of in of rate new forward and we year, us looking available,

refine better. to we've understood as that And it so, we've continued

Operator

Lacayo question from Company. Alvaro Gabelli is & Our next of

Alvaro Lacayo

Good morning, everyone.

one regarding question EMEA. Just

as see You the expect reductions the quantify EMEA XXXX, in can the to exits, idea benefits? would be noncore then that business And give on impacted cost of you talked Can if these helpful timing reduction. how just fixed you maybe us about you an well. of brunt inventory when

Marc Robert Bitzer

said Alvaro, quarters, so to of quarters on the the over these first you about exit think or the timing actions, three of probably few some two we on next the we next these try where all, it should of businesses. so

be quarter. And so, done will actions it in underway, are not the but one

same That's franchise two be you certain up. ramping on cost in we benefits then the fixed fast when of the benefits the networks, Hotpoint next should you year Turkey domestic the next quarters. see seeing that's and on say when and business, over i.e., to exit should them I ramping could true QX small slowly it probably so start up. expect as some where The is few, you should would or got three So next

Alvaro Lacayo

EMEA on impact it the And on inventory just reductions on kind an of in XXXX? had what

Marc Robert Bitzer

mentioned of the is part related actually all overall of to So on of that inventory the have, year-over-year what I million, Alvaro, $XXX big now – first you company reduction earlier Europe.

from of inventory sales additional in volumes you both So the an and reduction. side add Europe, lower combination

So you kind base roughly year should assume this ran our of European minus production that with about XX% entire volume.

cost the So you had a Europe. XXXX entire numbers effect in significant sitting in deleverage very

Operator

is Goldman next from Our question Doug Clark of Sachs.

Doug Clark

Hey, North have America. great. related I questions Thanks on lot. two a

some increases aggressively that you're First is competitors. the taking, the a some in price price in earlier bit of more of took than terms earlier year increases the you

much rising business throughout and just give industry, cause purchased So going rate has season of financing the That's holiday if or America particular I'm curious just us North be of sense replicated I'm a can question you some any second question. heading impact the that? curious increases is if through are interest if your then to the if how into these that on might in price is environment And noise. first

Marc Robert Bitzer

the additional which pricing, will can't it's Doug, doing, we when decision. So, pressures announced takeout late competitors early year we've Honestly, take base last we done on when can't we that's we be actions. the fully or mitigate That's for mix cost laundry then one. this and when pricing tell cost what We kitchen year what the announced I Marc. you see the other their

kitchen think increases can't cost is how heard market as come can't well that we we or doing. All again, say judging Obviously we we will understand our the unplanned inflation early never why saw about expect price and January. able comments is well. been because fact the the up has can that side in in these QX, from speaks you share And very As that's competitors from these announced price which on in I planned next what it. and our The price I volumes will picked to tell you you be just raw increase make effect year I increases material increases. past do comments, executed execute in the price to team I or our also will we be

Doug Clark

on... my And Okay. question then

Marc Robert Bitzer

the On financing.

Doug Clark

financing. Yeah, on

Marc Robert Bitzer

if just the pure parts I have America, is in it. the are somewhat outside in But side, appliance small of I the impact over more somewhat all would so in you and so fairly would finance. you've earlier of purchase industry It unit significant limited, say seen the amount at financing the on part. I not financing already an world homebuilding was I a But consumer rates, would to seen to Turkey, it's homebuilding the U.S. you the what have Brazil of the would've actually where if coming mentioned say financing. North consumer other you There a actual rising on like is see appliances it or you single on is limited. interest where much on consumer is kind side.

Doug Clark

And of that then follow-up, to the that a talking Okay. and has margin quick been moved XXXX. you've (XX:XX) the still just last kind in quarter right timeframe or bit? X% Is EBIT target

Marc Robert Bitzer

XXXX expect to margin have still X% we an Doug, EBIT to Europe. in of Yes, by X%

this it QX XXXX. obviously will precise that both one more in we So showing short-term contingent earnings And call. in guidance us all improvement then around January But the consistent. is for on the obviously now give is

Marc Robert Bitzer

question. I I with So guess last our at are that, think we

materials, tariffs headwinds a our issued beginning guidance. were and form far assume at of currency the in year And even the though just greater we XXXX year where perspective of give little and – me has maybe back isn't of bit it this me let on let additional step over yet. So as been obviously we could when anybody the the than close, external raw a

the for. amount on additional fact, In of these million planned challenges to we already $XXX million top than $XXX more original

reduction, an to margin this strong very earnings four of of but not able today per result a actions. business will expansions our Embraco sale cost and our also reconfirm being significant Europe. global refocus of fixed number have Europe actions tough and actions cost growth performance. favorable Three also world we and record strategic a right-size in in price of of is underway around rate, regions to Now We've our number now and tax turn the a only ongoing of a environment also our share disappointing and including guidance all-time delivered execution taken throughout

every take will actions continue region. necessary the challenges manage profitability and we and external in to to for have improve We all

I actions forward together for underlying the will am to strength the value we've look that I As business our XXXX, taken confident shareholders. significant of and our deliver

forward joining for call and with January on you on we XX. our again thank us to speaking So look fourth quarter earnings you today,

Operator

today's Whirlpool release Corporation's quarter This does conclude conference third XXXX earnings call.

You lines, may now have everyone disconnect your great a and day.

Max Tunnicliff	Whirlpool Corp.
Marc Robert Bitzer	Whirlpool Corp.
James Peters	Whirlpool Corp.
Kenneth R. Zener	KeyBanc Capital Markets, Inc.
Michael Jason Rehaut	JPMorgan Securities LLC
Sam J. Darkatsh	Raymond James & Associates, Inc.
David S. MacGregor	Longbow Research LLC
Susan Maklari	Credit Suisse Securities (NYSE:USA) LLC
Curtis Nagle	Bank of America Merrill Lynch
Michael Dahl	RBC Capital Markets LLC
Alvaro Lacayo	Gabelli & Company
Doug Clark	Goldman Sachs & Co. LLC

Whirlpool (WHR) 25 Oct 182018 Q3 Earnings call transcript